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Self-Enforcing International Agreements and Domestic Policy Credibility

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Author Info
Paola Conconi ()
Carlo Perroni ()

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Abstract

We explore the relationship between international policy coordination and domestic policy credibility when both must be self-supporting. Our arguments are presented in the context of a two-country, two-period model of dynamic emission abatement with transboundary pollution, where government policies suffer from a time-consistency problem. In the absence of repeated interaction, any form of coordination - between governments, and between governments and their respective private sectors - improves policy making. Nevertheless, under repeated interaction international policy spillovers can make it possible to overcome the domestic credibility problem; and, conversely, the inability to precommit to policy domestically can help support international policy cooperation.

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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 988.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_988

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Related research
Keywords: policy commitment self-enforcing international agreements

Find related papers by JEL classification:
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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  1. Everaert, Greetje M.M., 2004. "The Political Economy of Restructuring and Subsidisation: An International Perspective," BOFIT Discussion Papers 12/2004, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
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  2. Itai Agur, 2007. "The US Trade Deficit, the Decline of the WTO and the Rise of Regionalism," Economics Working Papers ECO2007/17, European University Institute. [Downloadable!]
  3. Maggi, Giovanni & Rodriguez-Clare, Andres, 2005. "A Political-Economy Theory of Trade Agreements," CEPR Discussion Papers 5321, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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